Recently, a case came to light in ITAT Mumbai where the Income Tax department searched a woman’s house and her bank locker. During this period, the department confiscated his diamonds, gold and silver articles and jewelery and considered them ‘assets without a clear source’. A total of 427.71 grams of gold jewellery, 258 grams of pure gold, 161.33 grams of gold diamond jewelery and mixed silver articles weighing 11,200 kg were recovered during the search.

When asked about the source of money for these items, the woman said that these assets were accumulated over many decades through marriage gifts, dowries, inheritances, family customary gifts and purchases. She was married for more than 35 years and she also furnished details showing that the total income of the family in the five relevant assessment years was approximately Rs. 4.55 crores.

Reference to CBDT Guideline No. 1916

The Income Tax Assessing Officer (AO) partially accepted his explanation and cited CBDT Guideline No. 1916. According to this directive, certain limits have been laid down in the tax law for confiscation of gold jewelery during income tax search. This includes 500 grams for married women, 250 grams for unmarried women and 100 grams for male family members. Ultimately, she won the case completely in the ITAT Mumbai.

The ITAT Mumbai ruled that while accepting ordinary gold jewelery and diamond studded gold jewelery as part of the same family property, it is not correct to treat pure gold as ‘impure’ merely because of their physical form. The ITAT Mumbai also held that the mere absence of old purchase bills cannot be considered conclusive, especially when the settlement is based on marriage gifts, inheritance and property accumulated over several decades.

Tax exemptions or legal limits are not fixed

The ITAT Mumbai also held that CBDT Directive No. 1916 does not prescribe any fixed tax exemption or legal limit for jewelery property. Rather, the quantities specified in the Directive provide a practical criterion for determining whether jewelery held by a family can properly be considered ‘understood’.

However, the ITAT Mumbai made it clear that its decision on pure gold was limited only to the facts of that particular case and should not be read as a general rule that all gold or pure gold automatically falls within the purview of CBDT Directive No. 1916.

How many pure gold and silver ornaments can be kept in the house?

Chartered accountant Suresh Surana reports in ET that there is no legal limit on how much gold or silver a person can keep at home or in a bank locker.

Surana says that anyone can keep any amount of gold and silver, provided it is legally acquired and the person can give satisfactory information about its source.

According to Sura, in the case of gold jewellery, CBDT’s Notification No. 1916 sets specific norms for seizure during income tax searches at 500 grams for a married woman, 250 grams for an unmarried woman and 100 grams for a male family member.

Surana says these limits should not be considered absolute limits on tax-free ownership, as judicial authorities may still seek clarification about their source.

For silver articles, no specific quantitative standards are laid down in this directive. Surana points out that in a case of ITAT Mumbai, the Tax Tribunal had accepted 11.2 kg of mixed silver items. For this, the woman’s marriage life, traditionally accumulated possessions, inheritance and the financial status of the family were taken into consideration.

However, this decision was based on the specific facts of that case and should not be seen as fixing a generally acceptable limit for silver holdings. So, says Surana, if holding large amounts of gold, silver or bullion, it would be prudent to preserve evidence or documents of their purchase, inheritance, gift or long-standing family status.